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Horsehead Reports Second Quarter 2011 Earnings
08/10/2011 - Horsehead Holding Corp. reported that consolidated net earnings were $6.3 million, or $0.14 per diluted share, for the second quarter of 2011, a 9.7% increase over the same period in 2010. This figure excludes noncash mark-to-market adjustments after taxes.
Horsehead Holding Corp. reported that consolidated net earnings were $6.3 million, or $0.14 per diluted share, for the second quarter of 2011, a 9.7% increase over net earnings for the second quarter of 2010 of $5.7 million, or $0.13 per diluted share.
This figure excludes noncash mark-to-market adjustments after taxes of $9.9 million, or $0.23 per diluted share, related to recently completed hedges. Including the after tax impact of the noncash mark-to-market adjustments, the company had a consolidated net loss of $(3.7) million, or $(0.08) per share, for the quarter ended June 30, 2011.
Executive Comments—“Our zinc product shipments for the quarter continued to improve over the shipment levels for the first quarter of 2011 and the year ended 2010. The improvement reflects the continued strengthening of the economy and our efforts to expand our shipments of zinc metal beyond our traditional markets. Our zinc smelting facility and our recycling plants operated at near-capacity during the first six months of 2011,” said Jim Hensler, President and Chief Executive Officer. “INMETCO also turned in another solid quarter.”
“We have successfully renewed all of our key labor contracts. While upfront costs associated with these contracts had an unfavorable effect on earnings for the quarter, these costs will be partially offset going forward by cost savings from the new medical insurance programs negotiated under these labor agreements. In addition, the rising cost of energy, primarily metallurgical coke, further contributed to higher costs during the quarter.”
Business Outlook—Hensler added, “Steel industry capacity utilization continues to be in the mid-70% level. While we continue to believe there is still considerable upside to these current dust receipt levels, we do not anticipate significant changes in EAF steel production levels in the short-term based on recent public comments by several steel producers. While we have excess EAF dust recycling capacity, we are taking a series of planned major maintenance outages at our recycling plants through early November that will effectively take several kilns out of service during the third and fourth quarters. In addition, we expect to take the annual maintenance outage at INMETCO before the end of this year.
“We continue to see strong demand for zinc metal while zinc oxide shipments have flattened out. We expect to continue to operate our full complement of six zinc smelting furnaces for the balance of the year. However, during the month of July, smelting output was approximately 1500 tons lower than expected due to production difficulties. While these production issues have subsequently improved, it may affect third quarter shipments. INMETCO continues to operate at full capacity even though tolling receipts softened during the quarter as stainless steel producers reduced production as we entered the summer months.
“We are continuing with our plans announced earlier this year to construct a new lower-cost, environmentally friendly zinc production facility. The recently completed hedging program and $100 million convertible notes offering were put in place to support this project. The hedges, which were entered into for zero net premium, provide a minimum zinc price of $.85/lb and a maximum zinc price of $1.20/lb during the anticipated construction period of January 2012 through June 2013 for approximately 75% of our expected output.
“We currently estimate that our total capital expenditure for the construction of the new zinc plant will range from $350 to $375 million and once fully operational, should provide us with annual incremental EBITDA of approximately $90 to $110 million. The estimated internal rate of return for the project is 45% to 50%.”
The plant will utilize the ZINCEXTM solvent extraction technology combined with electro-winning and casting capabilities for production capacity in excess of 150,000 tons of zinc metal per year from recycled sources. The new plant will be capable of producing special high grade (SHG) zinc and continuous galvanizing grade (CGG) in addition to the Prime Western (PW) grade that the company currently produces.
The project is on schedule, Hensler noted, as the company finalizes incentives and completes preliminary permitting activities before it announces the final site selection for the new facility. The company expects to begin construction by the end of this year and achieve start-up as early as the third quarter of 2013.
Horsehead Holding Corp. is the parent company of Horsehead Corp., a leading U.S. producer of specialty zinc and zinc-based products and a leading recycler of electric arc furnace dust, and The International Metals Reclamation Co. (INMETCO), a leading recycler of metals-bearing wastes and a leading processor of nickel-cadmium (NiCd) batteries in North America. Horsehead, headquartered in Pittsburgh, Pa., employs approximately 1100 people and has seven facilities throughout the U.S.
